FloridaTrend.com, the Website for Florida Business


Finance / Insurance

INSURANCE: The Fallout

It won't be Andrew-esque, but the insurance fallout from Hurricanes Charley, Frances, Ivan and Jeanne will dominate the market this year. The industry blew through its reserves and then some to cover $17.5 billion in insured wind losses in Florida.

"Some rate increases are going to be necessary," says Sam Miller, executive vice president of the Florida insurance Council. Customers may have trouble getting coverage. In November, Allstate announced it would stop writing new policies in most of Florida after losing the equivalent of all of its Florida policy profits since 1992.

Meanwhile, the industry is preparing to fight any hurricane-inspired regulation it finds burdensome. The justification: "It's going to continue to be tight in the homeowners market until Florida can attract capital for what's been spent," says William Stander, regional manager for the Property Casualty Insurers Association of America. Insurers want to tap the state's hurricane catastrophe fund earlier rather than suffer the same double-deductible bite homeowners felt.

The hurricanes affected commercial premiums as well. Robert Hartwig, chief economist for the insurance Information Institute, says Florida won't see the same drop in commercial premiums the nation will see, but Florida will be a competitive market "with a lot of capacity." On a November visit, "I saw no shortage of buildings going up. The coverage is there."

2005 Forecast: "We see a firming in property rates," says J. Hyatt Brown, chairman and CEO of Brown & Brown. "It's obviously due to the hurricanes. Any property that is coastal in Florida is going to have increased property pricing or face substantial windstorm deductibles. ... There's always been activity for mergers and acquisitions. That trend has been in place since 1947. It's going to continue."
BANKING: Looking Good

As long as any interest rate increases are gradual and small, bankers will have a good year. Ocean Bank CEO José Concepci?n expects 8% to 10% growth and to expand in Palm Beach, Broward and Miami-Dade. Riverside National Bank President Vernon Smith, his Fort Pierce office devoid of carpet and ceiling tiles thanks to hurricanes, says, "Frankly, I think the economy is going to be fine." Bankers will be watching for how regulators implement the federal Bank Secrecy Act, says Alex Sanchez, CEO of the Florida Bankers Association.

2005 Forecast: Ramiro Ortiz, president and COO of BankUnited, Florida's largest independent, says 2005 will be "a very strong year. In terms of growth, good, good things. The caveat here is rates. A sudden rapid uptick will hurt everybody."
PEOs: Growing Their Base

PEO customers are hiring -- excellent news for professional employer organizations whose revenues notch up with each additional worker. PEOs provide payroll, employee benefits, workers' comp and human resources services to clients. Most expect double-digit growth this year. "Some of the (past) bloodletting has strengthened the industry," says Tampa-based consultant Dan McHenry. Consolidation will continue as smaller players seek partners or acquirers with the technology infrastructure, creativity and capital to grow, says Craig Vanderburg, president and CEO of Presidion Solutions. "There continues to be a need to outsource what we do," he says.

PEOs in Florida
Employees: 696,453
Companies: 50,907
Payroll: $17.1 billion
Source: Florida Association of Professional Employer Organizations, 2003 survey

2005 Forecast: "Our clients are growing again so that's good news. The workers' compensation situation in Florida seems relatively stable," says Carlos Rodriguez, division president of ADP TotalSource in Miami.
FINANCIAL SERVICES: Strong Numbers

"We're booming," reports Van Johnson, a DeLand mortgage broker and president of the Florida Association of Mortgage Brokers. Property owners with hurricane damage are leveraging insurance and FEMA payouts to borrow more to renovate their property. The influx of cash, 77 million retiring Baby Boomers on the horizon, the state's crossroads economy and employers shifting retirement responsibility to employees all add up to 2005 looking strong for financial planners, mortgage bankers and brokers and others in financial services. Or, as Johnson says: "Things are popping."

2005 Forecast: "Assuming we don't experience any more extraordinary events, I would basically say the economy in 2005 will be relatively good, with 3% to 5% GDP growth. Florida will probably be at the high end or above the averages in the country. The investment climate will be pretty good. I expect it to be very similar to the year we just experienced," says Tom James, chairman and CEO of Raymond James Financial.